Parties

Initiator: Bank C (confirming bank)

Respondent: Bank U (issuing bank)

Background and transaction

• On 13 September 2008, the Respondent issued its documentary credit (the "credit") subject to UCP 600 and expiring on 21 October 2008 in Country S. The credit was stated to be available with any bank in Country S by negotiation of drafts at 180 days from the date of the bill of lading.

• On 13 September 2008, the credit was amended (1st amendment) - with the amount increased and other items.

• On 30 September 2008, the credit was amended (2nd amendment) - whereby the Initiator added its confirmation.

• On 24 October 2008 the Initiator negotiated documents. The Initiator confirmed receipt of the documents within the credit validity and within 21 days after the date of the bill of lading on its covering schedule to the Respondent.

• On 24 October 2008, the Respondent asked the Initiator to confirm the date of negotiation and the date of dispatch of the documents under the credit.

• On 27 October 2008 (Monday) the Initiator replied that it had negotiated the documents on 24 October and dispatched them on 27 October by DHL courier service and registered airmail.

• On 31 October 2008, the Respondent sent a SWIFT MT 750, and on 3 November 2008 a MT 999 (advice of discrepancy) message detailing three discrepancies:

- "Materials being sent is not as per L/C description.
- Insurance policy certificate is expired.
- The bill has been negotiated after the expiry of LC."

• On 3 November 2008, the Initiator rejected the advice of discrepancies.

• After that date there followed various SWIFT messages from both parties, each maintaining its position.

• On 7 November 2008, the Respondent advised that it had no option but to return the documents.

• On 7 November 2008, the Initiator disputed both advices of discrepancies/refusal of documents and the returning of the documents.

• On 14 November 2008, after receipt of documents on 10 November, the Initiator repeated the previous messages and held the Respondent fully responsible for any costs and charges resulting due to the vessel not unloading the cargo upon arrival at the discharge port resulting from the return of the documents.

Issue(s)

The Initiator:

- advised the Respondent of its rejection of advices of discrepancies/refusal of documents;

- disputed the return of the documents and any consequence arising therefrom;

- seeks an ICC DOCDEX Decision to determine whether the Respondent's objections are justifiable and whether the Respondent complied with the requirements of UCP 600.

Initiator's claim

In its request to the ICC dated 28 November 2008, the Initiator stated that:

1. it negotiated complying documents on 24 October 2008 for USD 415,537.63 with a maturity date of 26 March 2009.

2. it confirmed receipt of the documents within the credit validity and within 21 days after B/L date. The documents were dispatched on 27 October 2008.

3. it rejected the entire advice of discrepancies pointing out that this advice did not comply with UCP 600 sub-article 16 (c) (iii).

The Initiator further states:

• Discrepancy (1): Invoice/goods description was not at all conflicting with the goods description stipulated in the credit nor with UCP 600 sub-article 18 (c) and ISBP publication 681, paragraphs 58 and 59.

• Discrepancy (2): Certificate of insurance fully complies with the credit terms.

• Discrepancy (3): Receipt of documents was within the credit validity and 21 days after B/L date.

Negotiation of the documents occurred on 24 October and (due to closing schedule/time for mailing documents) the documents were sent on 27 October.

The Initiator asked for an authenticated SWIFT advice confirming remittance of the cover at maturity. It stated that the Respondent was not authorized to return the complying documents and held the Respondent fully responsible for any costs and charges accruing as a result of not unloading the vessel upon its arrival at the discharge port, due to documents being returned to it. The Initiator also stated that it held the documents in trust for the Respondent as if they were at its counters and belonged to it as correctly presented under the credit. It also stated that if the Respondent's authenticated advice of acceptance of the documents was not received it would obtain an ICC DOCDEX decision, reserve the right to legal action and hold the Respondent responsible for any cost and loss of interest (10 November 2008).

Respondent's reply

The Respondent did not correspond with the Initiator after 10 November, namely concerning a reply as to the ICC DOCDEX decision requested by the Initiator.

The Respondent sent an MT 799 SWIFT message to the Initiator asking it to confirm the date of negotiation and the date of dispatch of the documents under the credit. These were delivered to it on 30 October 2008.

The second banking day following receipt of the documents, the Respondent, by its MT 999 SWIFT message, stated the following discrepancies:

"1) Materials being sent is not as per LC description.

2) Insurance Policy certificate is expired.

3) The Bill has been negotiated after the expiry of LC."

Note: an MT 999 was sent in the form of an MT 750.

A SWIFT advice of discrepancy MT 750 was then sent to the Initiator on 4 November 2008, stating the same discrepancies again. Another was sent on 6 November 2008.

By its SWIFT message sent on 6 November, the Respondent:

a) brought the attention of the Initiator to the description of goods in field 45A of the MT 700 and referred it to UCP 600 sub-article 14 (e), at the same time rejecting the Initiator's contention "that the goods described/stated in the presented documents as fully complying with goods described/stipulated in L/C"; and

b) mentioned that the maximum time available for negotiation of documents was 21 days from the shipment date (27 September + 5 days), which did not comply with the period available for negotiation as per UCP 600 sub-article 14 (b).

N.B. It should be noted that no reference to the alleged discrepancy "Insurance Policy Certificate is expired" was made in the Respondent's reply.

In its SWIFT message on 7 November, the Respondent stated: "since we have not received any reply to our msg 799 on 06.11.2008 and applicant is not willing to accept discrepant documents, we have no option but to return the documents."

In its letter of 8 November, the Respondent returned the documents to the Initiator.

Documents submitted by the parties

Documents submitted by the Initiator (all of which are copies)

• 28.11.2008 request to the ICC International Centre for Expertise for a DOCDEX decision;

• 13.09.2008 issue of the documentary credit;

• 23.09.2008 amendment No.1;

• 26.09.2008 advice of credit and amendment No.1;

• 30.09.2008 amendment No.2, including request for confirmation;

• 01.10.2008 advice of amendment No.2 and L/C confirmation;

• 24.10.2008 confirming bank (Initiator) schedule confirming receipt of documents within credit validity and within 21 days after B/L date and requesting cover at maturity (26 March 2009 for USD 415,537.63) and enclosing documents (14 documents);

• 24.10.2008 issuing bank (Respondent) request by MT 799 of the date of negotiation and the date of dispatch of documents;

• 27.10.2008 Initiator's reply: it negotiated documents on 24 October and dispatched them on 27 October, and it received the documents within the credit's validity and within 21 days after the B/L date;

• 30.10.2008 DHL track results with detail of delivery;

• 31.10.2008 Respondent's MT 999 (serving as MT 750) stating 3 discrepancies: "i) Materials being sent is not as per LC description; ii) Insurance policy certificate is expired; and iii) The Bill has been negotiated after expiry of LC";

• 03.11.2008 Initiator's MT 799 rejection of entire advice of discrepancies;

• 04.11.2008 Respondent's MT 750 advice of discrepancy (repeated);

• 06.11.2008 Initiator's MT 799 advice of rejection of refusal with detailed reasons;

• 06.11.2008 Respondent's MT 750 advice of discrepancy (repeated);

• 06.11.2008 Initiator's MT 799 repeating its SWIFT of 3 November 2008;

• 06.11.2008 Respondent's MT 799 repeating discrepancies i) and iii);

• 07.11.2008 Initiator's MT 799 rejecting points i) and iii);

• 07.11.2008 Respondent's MT 799 informing return of documents;

• 07.11.2008 Initiator's MT 799 strongly refuting the advices of discrepancies/refusal of documents and objecting to the return of complying presentation;

• 08.11.2008 Respondent's letter returning the documents;

• 14.11.2008 Initiator's MT 799 advising rejection of advices of discrepancies/refusal of documents and drawing attention to the responsibility for costs, demurrage or any other charges for the resulting impediment to unloading the vessel upon arrival;

• 17.11.2008 Initiator's MT 799 with the same content as previous message of 14 November 2008, but in addition giving its expectation that it would receive advice of acceptance of the documents and confirmation of cover at maturity; otherwise to seek an ICC DOCDEX decision and to reserve the right to legal action against the Respondent with responsibility for costs and loss of interest.

Documents submitted by the Respondent

No documents were submitted by the Respondent. Since 7 November 2008, no more correspondence appears to have been sent to or received from the Respondent. The ICC International Centre for Expertise (the Centre) received no response from the Respondent in relation to the Respondent taking part in the DOCDEX decision.

Analysis and conclusion

From the documents presented, the matter is as follows: Initiator schedule of 24 October 2008 confirms receipt of documents within the credit validity and receipt of documents within 21 days after B/L date.

Question: Are the points raised as discrepancies by the Respondent correct and valid? Let us consider the three points disputed as discrepancies by the Respondent (by referencing their MT 999 message of 31 October 2008 - serving as an MT 750 - using fields 72 and 77A, instead of using an MT 734 as the message form for their refusal of documents).

1. "Materials being sent is not as per L/C description"

The Respondent did not state which document(s) are regarded as discrepant. As the test for compliance is stricter in the invoice than other documents, we shall examine this first:

Our position: Description of goods (as appearing on the invoice) is in respect of credit details (ASSAYING tolerances are permitted by the frame of L/C). There is no discrepancy (unanimous decision).

2. "Insurance Policy Certificate is expired"

This item has been initially raised by the Respondent (31 October 2008) and has been rejected by the Initiator (3 November 2008). The Respondent (as from 6 November 2008) has made no further reference to this alleged discrepancy.

Our Position: The insurance document has been worded correctly and complies with the L/C terms and conditions. There is no discrepancy (unanimous decision)

3. "The Bill has been negotiated after the expiry of the credit"

The facts: The Initiator stated in its schedule of 24 October: "we confirm receipt of documents within LC validity and within 21 days after B/L date." The Respondent asked on 24 October (by SWIFT MT799): "Pls confirm us by return SWIFT the date of negotiation and the date of dispatch of the documents against the A/M LC."

- The Initiator replied on 27 October: "Pls note that on 24.10.2008 we have negotiated documents ... documents have been dispatched on 27.l0.2008 by DHL courier service and reg airmail B/L dated 27.09.2008. We confirm receipt of documents within LC validity and within 21 days after B/L date."

The sequence of events:

B/L date (on board date)
27.09.2008

To comply with field 48 (MT 700) docs must be presented at the latest by
18.10.2008

This date is a Saturday in Country S (banks are closed)
18.10.2008
Saturday

Presentation date to the Initiator by beneficiaries
20.10.2008
Monday

Initiator has maximum of five banking days for examination of docs : Until =>
27.10.2008